Senate File 242
SENATE FILE
BY KETTERING, REHBERG, ZIEMAN,
SHULL, JOHNSON, DRAKE,
STEWART, and GASKILL
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the imposition of a revenue nondistribution
2 tax on certain credit unions and including an applicability
3 date provision.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 2405XS 80
6 mg/cf/24
PAG LIN
1 1 Section 1. Section 422.60, subsection 1, Code 2003, is
1 2 amended to read as follows:
1 3 1. a. A franchise tax according to and measured by net
1 4 income is imposed on financial institutions, except
1 5 nonqualified credit unions, for the privilege of doing
1 6 business in this state as financial institutions.
1 7 b. A revenue nondistribution tax measured by the increase
1 8 in equity is imposed on nonqualified credit unions for the
1 9 privilege of doing business in this state as financial
1 10 institutions.
1 11 Sec. 2. Section 422.60, subsection 2, Code 2003, is
1 12 amended by adding the following new unnumbered paragraph after
1 13 unnumbered paragraph 1:
1 14 NEW UNNUMBERED PARAGRAPH. A nonqualified credit union
1 15 incorporated or authorized to do business under chapter 533 is
1 16 not subject to the state alternative minimum tax.
1 17 Sec. 3. Section 422.61, Code 2003, is amended by adding
1 18 the following new subsection:
1 19 NEW SUBSECTION. 0A. "Equity" means, in the case of a
1 20 nonqualified credit union, the sum of the regular reserves,
1 21 undivided earnings, and net income of the credit union as
1 22 reflected in its annual report under section 533.6. In the
1 23 case of a credit union designated as serving predominantly
1 24 low=income members, "equity" also includes uninsured secondary
1 25 capital.
1 26 Sec. 4. Section 422.61, subsection 1, Code 2003, is
1 27 amended to read as follows:
1 28 1. "Financial institution" means a state bank as defined
1 29 in section 524.103, subsection 33, a state bank chartered
1 30 under the laws of any other state, a national banking
1 31 association, a trust company, a federally chartered savings
1 32 and loan association, an out=of=state state chartered savings
1 33 bank, a financial institution chartered by the federal home
1 34 loan bank board, a non=Iowa chartered savings and loan
1 35 association, a nonqualified credit union incorporated or
2 1 authorized to do business under chapter 533, a nonqualified
2 2 credit union incorporated or authorized to do business under
2 3 the laws of another state, an association incorporated or
2 4 authorized to do business under chapter 534, or a production
2 5 credit association.
2 6 Sec. 5. Section 422.61, Code 2003, is amended by adding
2 7 the following new subsections:
2 8 NEW SUBSECTION. 1A. "Increase in equity", in the case of
2 9 a nonqualified credit union, means the increase in the amount
2 10 of equity of the credit union at the end of the taxable year
2 11 as reflected in its annual report under section 533.6 over the
2 12 amount of equity of the credit union at the end of the
2 13 previous taxable year as reflected in the previous year's
2 14 annual report under section 533.6.
2 15 NEW SUBSECTION. 3A. "Nonqualified credit union" means a
2 16 credit union that does not meet the requirements to be a
2 17 qualified credit union, as specified in section 533.24,
2 18 subsection 3.
2 19 Sec. 6. Section 422.61, subsection 3, unnumbered paragraph
2 20 1, Code 2003, is amended to read as follows:
2 21 "Net income", for a financial institution other than a
2 22 nonqualified credit union, means the net income of the
2 23 financial institution computed in accordance with section
2 24 422.35, with the following adjustments:
2 25 Sec. 7. Section 422.62, Code 2003, is amended to read as
2 26 follows:
2 27 422.62 DUE AND DELINQUENT DATES.
2 28 The franchise tax or revenue nondistribution tax, as
2 29 applicable, is due and payable on the first day following the
2 30 end of the taxable year of each financial institution, and.
2 31 In the case of a financial institution other than a
2 32 nonqualified credit union, the tax is delinquent after the
2 33 last day of the fourth month following the due date or forty=
2 34 five days after the due date of the federal tax return,
2 35 excluding extensions of time to file, whichever is the later.
3 1 In the case of a nonqualified credit union, the tax is
3 2 delinquent after the last day of the fourth month following
3 3 the due date. Every financial institution shall file a return
3 4 as prescribed by the director on or before the delinquency
3 5 date.
3 6 Sec. 8. Section 422.63, Code 2003, is amended to read as
3 7 follows:
3 8 422.63 AMOUNT OF TAX.
3 9 The franchise tax is imposed annually in an amount equal to
3 10 five percent of the net income received or accrued during the
3 11 taxable year. The revenue nondistribution tax is imposed
3 12 annually in an amount equal to five percent of the increase in
3 13 equity for the taxable year. If the net income or increase in
3 14 equity, as applicable, of the financial institution is derived
3 15 from its business carried on entirely within the state, the
3 16 tax shall be imposed on the entire net income or increase in
3 17 equity, as applicable, but if the business is carried on
3 18 partly within and partly without the state, the portion of net
3 19 income or increase in equity, as applicable, reasonably
3 20 attributable to the business within the state shall be
3 21 specifically allocated or equitably apportioned within and
3 22 without the state under rules of the director.
3 23 Sec. 9. Section 422.66, Code 2003, is amended to read as
3 24 follows:
3 25 422.66 DEPARTMENT TO ENFORCE.
3 26 The department shall administer and enforce the provisions
3 27 of this division, and all applicable provisions of sections
3 28 422.24, 422.25, 422.26, 422.28, 422.29, and 422.30, and
3 29 division VI of this chapter, apply to financial institutions
3 30 and to the franchise tax and revenue nondistribution tax
3 31 imposed by this division.
3 32 Sec. 10. Section 533.24, Code 2003, is amended to read as
3 33 follows:
3 34 533.24 TAXATION.
3 35 1. A credit union shall be deemed an institution for
4 1 savings and is subject to taxation only as to its real estate
4 2 and moneys and credits. However, those nonqualified credit
4 3 unions subject to the state revenue nondistribution tax
4 4 imposed in chapter 422, division V shall not be taxed on their
4 5 moneys and credits. The shares shall not be taxed.
4 6 2. a. The moneys and credits tax on credit unions, except
4 7 those nonqualified credit unions subject to the state revenue
4 8 nondistribution tax, is imposed at a rate of five mills on
4 9 each dollar of the legal and special reserves which are
4 10 required to be maintained by the credit union under section
4 11 533.17, and shall be levied by the board of supervisors, and
4 12 placed upon the tax list and collected by the county
4 13 treasurer, except that an exemption shall be given to each
4 14 credit union in the amount of forty thousand dollars. The
4 15 amount collected in each taxing district within a city shall
4 16 be apportioned twenty percent to the county, thirty percent to
4 17 the city general fund, and fifty percent to the general fund
4 18 of the state, and the amount collected in each taxing district
4 19 outside of cities shall be apportioned fifty percent to the
4 20 county and fifty percent to the general fund of the state.
4 21 The moneys and credits tax shall be collected at the location
4 22 of the credit union as shown in its articles of incorporation.
4 23 b. The moneys and credits tax imposed under this section
4 24 subsection shall be reduced by an investment tax credit
4 25 authorized pursuant to section 15E.43.
4 26 c. The moneys and credits tax imposed under this section
4 27 subsection shall be reduced by an investment tax credit
4 28 authorized pursuant to section 15E.51.
4 29 3. a. A credit union that does not meet the requirements
4 30 of a qualified credit union as specified in paragraph "b" is
4 31 subject to the state revenue nondistribution tax imposed in
4 32 chapter 422, division V.
4 33 b. A credit union is a qualified credit union if the
4 34 credit union meets all of the following requirements:
4 35 (1) The credit union has less than one hundred fifty
5 1 million dollars in assets as shown in its latest annual report
5 2 under section 533.6, provided that this requirement shall not
5 3 apply to a credit union with a field of membership limited
5 4 exclusively to an occupational, industry, or employer common
5 5 bond based upon common business, employer, or corporate
5 6 parent.
5 7 (2) The credit union does not make or participate in
5 8 commercial loans or business purpose loans that together at
5 9 any time exceed an aggregate amount equal to the lesser of one
5 10 and three=fourths times the credit union's net worth or twelve
5 11 and one=fourth percent of the credit union's total assets.
5 12 c. For purposes of this subsection:
5 13 (1) "Agricultural purpose" means the same as defined in
5 14 section 535.13.
5 15 (2) "Business purpose" means a for=profit activity by an
5 16 individual or a for=profit entity including, but not limited
5 17 to, a commercial, service, or industrial enterprise carried on
5 18 for profit, or an investment activity.
5 19 (3) "Commercial loan" means a loan to an individual or
5 20 entity for a business purpose or an agricultural purpose.
5 21 "Commercial loan" does not include a loan the proceeds of
5 22 which will be used primarily for the purchase, construction,
5 23 or improvement of real property, including a single=family or
5 24 a two=family dwelling occupied or to be occupied by the
5 25 borrower.
5 26 (4) "Loan" includes the refinancing of a contract of sale,
5 27 and the refinancing of a prior loan, whether or not the
5 28 borrower was also the borrower under the prior loan, and the
5 29 assumption of a prior loan.
5 30 (5) "Net worth" means the credit union's retained earnings
5 31 including undivided earnings, regular reserves, and any other
5 32 appropriations designated by management or regulatory
5 33 authority.
5 34 Sec. 11. APPLICABILITY DATE. This Act applies to taxable
5 35 years beginning on or after the effective date of this Act.
6 1 EXPLANATION
6 2 This bill imposes a revenue nondistribution tax as part of
6 3 the tax on financial institutions doing business in Iowa and
6 4 subject to taxation by the state on chartered credit unions of
6 5 this or another state that do not meet certain requirements.
6 6 A credit union will not be subject to the revenue
6 7 nondistribution tax if it has assets of less than $150 million
6 8 or its members share a common bond such as single employer or
6 9 occupation, and it does not make or participate in commercial
6 10 or business purpose loans of a certain quantity.
6 11 For the purpose of computing the tax, the increase in the
6 12 equity of the credit union determined at the end of the
6 13 taxable year is the taxable event.
6 14 Various credits applicable to the franchise tax apply to
6 15 the revenue nondistribution tax and the tax is subjected to
6 16 prepayment requirements.
6 17 The moneys and credits tax currently imposed on all credit
6 18 unions is made inapplicable for those credit unions that are
6 19 subject to the revenue nondistribution tax.
6 20 The bill applies to taxable years beginning on or after the
6 21 effective date of the bill.
6 22 LSB 2405XS 80
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